Corporation attempting to control losses with digital shift, portfolio trimming

SEGA has announced that it will be streamlining its EU and US operations, resulting in job losses and the cancellation of some titles.

The move comes in response to increased loss predictions for the forthcoming year-end financials, with net income projections slashed by almost 50 per cent to ¥18 billion from ¥38 billion for the year ending March 31, 2012.

For the same period in the year previous, SEGA Sammy recorded profits of ¥41.5 billion.

No indication of how many jobs will be lost at the publisher, but it seems that those which are cut will be taken from areas of the business focused predominantly on the EU and US market. The changes, intended to "create a smaller company positioned for sustained profitability," have been blamed on unfavourable market conditions in the West.

"Consumer Business centered on SEGA Corporation is expected to post operating loss
in the year ending March 2012, due to the challenging economic climate and significant changes in
the home video game software market environment in the U.S. and Europe," reads a SEGA press release.

"It is essential to streamline organizations in the field of home video game software in the U.S. and European markets, while shifting to a structure that corresponds to change in environment, including strengthening development in the field of digital content."

SEGA Press Release

"Given this circumstance, the companies determined that in order to actualize earnings recovery of
the Consumer Business in the following period and after and return to a growth path, it is essential
to streamline organizations in the field of home video game software in the U.S. and European
markets, while shifting to a structure that corresponds to change in environment, including
strengthening development in the field of digital content."

Games which are designed to appeal to European and American customers will be reduced, also, with only proven IP seeing continued development.

"We conducted detailed reviews of earnings projections for titles targeted toward the U.S. and
European markets and decided to narrow down sales titles from the following period and after to
strong IPs, such as 'Sonic the Hedgehog,' 'Football Manager', 'Total War' and 'Aliens' which
are expected to continue posting solid earnings," continues the release.

"In accordance with this, we are canceling the development of some game software titles."

Although SEGA is still predicting a small profit for the year total, it does expect an "extraordinary loss" of ¥7.1 billion for the period as a result of the adverse conditions, of which ¥4.9 billion will be costs from the restructuring itself.

SEGA has been contacted for further details on how many jobs may be lost and which titles have been cancelled.

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Umm... I wasn't aware that SEGA had changed their philosophy of "not Sonic, not TW, not FM then no greenlight".

Obviously they have dabbled recently and really should be proud of their work with Platinum but they really need to give their digital ventures a bit of time. Most of these are slow burn and are a great way for them to be making their back catalogue profitable again.

Generally I think they have the opportunity and the expertise to do something a bit braver in the digital space and start making a name for themselves.

EDIT: Also find this whole cull quite culturally interesting as SOE has long running been SEGA's most profitable arm yet no one in Japan is getting the chop...

Secondly, Bruce we get it by now. Yes you like Zynga stuff and similar stuff we get it. That`s good for you and many people like Zynga and social gaming and that kind of things. The day Zynga aquires a real game developer will be one of the sadets days in video gaming history since Sega left the hardware market. I would never ever want Zynga as the owners of IP`s like Yakuza, Sonic, Valkyria Chronicles and co.

You know what I think about Zynga? If I would have the choice of having no job or working for Zynga I would rather have no job because I would never ever work for them despite the high salary they offer.

Sega has great IP and knows how to exploit it. Like Infogrames in the early 2000s and GAME at the moment, Sega built up a cost base in the hope that it could become a global powerhouse but despite the great IP, there are still not enough revenue drivers to support the headcount despite some Western offices being successful. Publishers and retailers should cut their cloth accordingly to suit the current market transition and at the same time target growth with their heads and not their hearts.

I think, SEGA are making the right call to tailor their IPs and services accordingly. Its a tough 2012 and one needs to always plan for the future. It remains to be seen what kind of job cull is involved, as it might not involve much developmental related culls and at best everything is quite speculative at present

If one were to look at the core assets - there is a amazingly long list of first party and 3rd party titles published/developed by SEGA. Its just that in the west, we dont hear or are fully aware of the list...here is a small sample

I hope Bayonetta 2 gets commissioned. I didn't 'get' it at first; I found the style very unappealing, it seemed a bit overtly-silly for my tastes these days and I found the presentation of Bayonetta herself borderline embarrassing. However, I went back to it after finishing Vanquish (which was also awesome) and had a new appreciation for its tongue-in-cheek style and self-knowing silliness. Not to mention when I played it properly for a couple of hours I started to appreciate how in-depth the combat was and what a bloody clever feature Witch Time was too.

Anyway, hopefully Anarchy Reigns will be successful for them, but it can't see it doing anything more than modest numbers really. Nonetheless, I think the PlatinumGames partnership is one of the best things Sega has done in years and hopefully they'll continue to work together in the future.

I agree with Dr Wongs comment that Sega have to tailor their business to the market. It's just a real shame that in times of economic austerity more people lose their jobs and the vicious cycle continues.